PH net external liability narrows

The Philippines has reduced international financial liabilities as of the second quarter, but overall it remains a debtor nation, central bank data released earlier this week showed.

The international investment position (IIP)—a summary of the country’s stock of financial claims on and liabilities to the rest of the world—was a negative $39.2 billion for the period, according to preliminary figures released by the Bangko Sentral ng Pilipinas (BSP).

This net liability position was down from $43.2 billion in the first three months of 2015. Year on year, the net liability position was also an improvement from June 2014’s $44.1 billion.

Total external financial liabilities fell by $3.5 billion to $190.1 billion for the latest quarter, due mainly to revaluation adjustments arising from changing market prices, while total external financial assets rose by $500 million to $150.9 billion. The BSP traced the improvement to investments in equity and debt issued by non-residents and direct investments abroad.

By sector, the central bank said it was the only one to have maintained a positive balance with a net external asset position of US$80 billion, up US$300 million from end-March. This was due to higher reserve assets.

Banks, the general government and other sectors recorded net liability positions, albeit improved from three months earlier.

For banks, the net liability was $7.1 billion, down from $7.6 billion. The BSP said this was due to an 11.8 percent decline in local bank issuances of equity securities held by non-residents —partly offset by a 7.6% rise in foreign loans—and an 8.5 percent increase in residents’ holdings of debt securities issued by non-residents.

The general government’s net liability position fell to $36.3 billion, down from end-March’s $36.9 billion. This was traced to a $1.2-billion decline in government debt held by non-residents that more than offset a $600-million increase in foreign loans.

Other sectors recorded a net liability of $75.8 billion, down from $78.4 billion as residents trimmed their debt to foreign portfolio investors (by $1.4 billion) and direct investors ($900 million in terms of equity capital).

The BSP held the largest share of the country’s external financial assets at $81.3 billion. Others sectors accounted for $47.3 billion and banks had the remaining $21.6 billion.

In terms of external financial liabilities, the bulk—$123.7 billion—was held by other sectors, followed by the general government at $36.3 billion, banks at $28.7 billion and the BSP at $1.3 billion.

The IIP is a companion to the balance of payments, which is a record of the country’s transactions with the rest of the world. The BSP started releasing quarterly IIP data last year.